As DIY investing goes mainstream, one couple lost their life savings by using
a tool meant for professionals

Your Money today publishes the shocking account of a couple who lost their life savings, in part because an online stockbroker allowed them to borrow thousands of pounds to invest in shares.

The case emerges just as many stockbrokers, which traditionally served wealthy and experienced investors, enter the mainstream. These brokers now seek to attract savers with smaller pots of money and less experience of the stock market.

Gianpaolo Prinzi, 53, and his partner, Fernanda Freitas, 51, lost £180,000 in a series of trades after experimenting with a highly dangerous investing tool that is offered to all Barclays Stockbrokers customers.

Despite never having traded in shares before, the couple were given access to thousands of pounds of borrowed cash to invest immediately in 2008.

As share prices plummeted, Mr Prinzi and Mrs Freitas panicked and tried to use the credit facility to recover their losses. They borrowed extra money, making speculative bets on shares they hoped to sell at a profit.

But the first-time investors soon became embroiled in a vicious cycle: as global markets began to swing violently during the financial crisis, Barclays periodically forced them to sell shares to clear the debts.

Mr Prinzi said: “Within a few weeks we saw the money disappearing and I started to panic and behave irrationally. Using the account without any experience or advice destroyed our life.”

The couple’s savings – resulting from the sale of their London home – were entirely lost and their health deteriorated. They moved to Portugal, where they now live, as a result of the losses.

The credit tool in question is available to all investors, regardless of age, expertise or wealth, who open a MarketMaster account. Apart from tax-free Isas, this is Barclays’ main investment account. On signing up, customers receive a £7,500 trading allowance on credit (see image below). Subsequently, the more they invest, the more they can borrow. This is designed to allow investors to grab stock market opportunities if their account balance is low.

But it also allows for extreme risk-taking – accidental or intentional – whereby savers can borrow multiple times before repaying the debt. If their “gambles” go wrong, the losses can run out of control. Posts on internet forums suggest that other novice investors, including students, have suffered after using the credit tool this way.

Such cases raise questions about whether inexperienced investors should be given access to high-risk trading tools, often when they have not been requested and when the consequences can be so extreme.

Barclays insisted its tool was never intended to be used in the manner adopted by Mr Prinzi and Mrs Freitas and cited only a handful of similar complaints. However, emails shown to The Telegraph indicate that Anthony Jenkins, Barclays’ chief executive, has instructed a senior compliance director to investigate.

Officials appear concerned about the existing warnings and explanations on Barclays’ website, and whether the credit facility should be an optional extra rather than a default service.

The stockbroker last month moved some of its “higher-risk” products and accounts to a new website as it tries to adapt its service to a wider market.

He said: “I wouldn’t trust most professionals to use this type of tool, let alone give access to those without highly developed skills and qualifications. It’s like giving a child a chemistry set without supervision.

“It encourages people to trade beyond their means. If share prices fall and their money is called in, investors are finished.”

The Financial Conduct Authority, the City regulator, will within months publish an investigation into whether DIY investing services should improve to stop customers making grievous mistakes.

An FCA spokesman said the watchdog was aware of Mr Prinzi’s case, which is under review by the financial ombudsman, adding that stockbrokers must “work to ensure” that their tools are used by those for whom they are intended.

A spokesman for Barclays Stockbrokers said: “We understand this is a distressing situation. We offer a range of products to meet the needs of different investors.

“We work hard to ensure these products are appropriate for how clients use them and that they reflect the feedback they give us.”

A scar that will never heal

The story of Gianpaolo Prinzi and Fernanda Freitas (pictured above) began in late 2008, when Mr Prinzi sold his three-bedroom house in Wembley. The couple, who had always managed their finances prudently and had no history of bad debts, paid off Mrs Freitas’s mortgage and put some money towards a dog shelter they run in Portugal. The rest was invested in shares for retirement.

Mr Prinzi, who worked for the Jordanian royal family in Kensington and later as a security engineer, opened a MarketMaster account with Barclays. He discovered a function called “Available to Invest”. This provides instant credit to buy shares.

The money must be repaid within three days by card or direct debit. However, the system continues to make credit available even if the money isn’t collected.

So as their losses mounted, the couple borrowed frantically and bought shares based on “rise and fall indicators” on Barxdirect, the analysis tool provided by Barclays, but since removed to a separate, “high-risk” website.

Mr Prinzi saw 98 direct debits returned unpaid, using credit in a series of manoeuvres to invest up to 850pc of the value of his holdings. He estimates that £16,000 was taken in trading commission and £1,400 in late payment fees between 2008 and 2011, when he ran out of money. He said: “This has left a scar that time will never heal.” Mrs Freitas added: “You become a gambler. I have cried looking at my account history – I couldn’t see I was losing all my money.”